InterContinental Hotels Group PLC (IHG) today announces it has agreed to sell InterContinental London Park Lane (“the Hotel”) to Constellation Hotel (Opco) UK S.A., that’s an affiliate of Constellation Hotels Holding Limited, a center Eastern private investment group. IHG’s leasehold interest within the Hotel was sold for gross cash proceeds of £301.5m ($457m*), 62% above 31 December 2012 net book value.
IHG has secured a 30 year management contract at the Hotel, with three ten year extension rights at IHG’s discretion, giving an expected contract length of 60 years. Management fees are expected to be approximately £4m ($6m*) each year.
The Hotel was opened in 1975 as a purpose built InterContinental and was wholly owned by IHG since 1999. The Hotel generated revenues of $89m, EBITDA of $39m and EBIT of $33m in 2012.
The transaction is anticipated to finish within the second quarter of 2013, subject to the satisfaction of certain standard conditions. The proceeds could be used for general corporate purposes, with £61m ($93m*) used to present security over UK pension liabilities which have been previously secured against the hotel.
IHG indicated in November 2012 that the Hotel may be the next major asset considered on the market and announced on 19 February that the Hotel was being actively marketed for disposal. Since becoming a standalone company in April 2003, on completion of this disposal IHG can have sold 191 hotels for proceeds of $6.1bn.
Richard Solomons, Chief Executive of IHG, commented:
“The transaction we have now announced today to sell InterContinental London Park Lane highlights the price of our asset portfolio and the attractiveness of InterContinental as one of the most world’s leading luxury hotel brands. It’s another step in our long standing commitment to scale back the capital intensity of IHG. We’re more than happy to be working closely with Constellation Hotels, a respected hotel investor, who could be an excellent partner and with whom we glance forward to building a protracted term relationship.”
Transaction Details:
1. The purchasing entity is Constellation Hotel (Opco) UK S.A..
2. The Hotel has 447 guest rooms.
3. The web book value of the assets sold was £186.6m ($302m) as at 31 December 2012.
4. At current exchange rates the transaction will give rise to an estimated group reported exceptional pre-tax profit on disposal of c.$150m*, with an excellent non-cash tax charge estimated at c.$30m*.
5. Net cash proceeds are expected to be c.$446m* after:
a. Estimated transaction costs of c.$9m*;
b. Estimated payment of $2m* to settle the pension liabilities of current and previous hotel employees.
Note: $93m* of the money proceeds might be used to offer security over UK pension liabilities that have been previously secured against the Hotel.
6. The Hotel assets were sold on a 16.3.x post fees and post FF&E reserve 2012 EBITDA multiple.
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